It’s hard to imagine the market and world’s economies carrying on like this forever.
You can’t continue to have a situation where a crisis appears and the only solution is to print more money and postpone the inevitable fallout to a later date.
You’ve doubtless heard the saying about ‘kicking the can down the road.’ One day someone will have to pick up the can. Right now no one knows when that day will arrive…or who will pick it up.
But that doesn’t mean the market and world’s economies can avoid the consequences forever.
That’s why two of our colleagues suggest you remain on high alert, because the blowback from ‘kicking the can’ could come at any moment…
As you know, we’re betting the Australian stock market will hit 6,000 points early next year and 7,000 points in 2015. We’re so confident that we topped up our personal share portfolio on Friday, taking advantage of the lower market.
We believe stocks will rally for two reasons.
You’ll see a continued demand for dividend paying stocks (which is why over one-third of the Australian Small-Cap Investigator stocks pay a dividend), plus you’ll see investors take more risks and buy growth stocks.
That’s especially so if investors believe the economy is improving (whether it really is improving or just an illusion is irrelevant. Investors buy stocks if they think things are getting better).
But we won’t deny it. We’re certain the markets can only cope with so many crises and temporary fixes. At some point investors will say they’ve had enough and refuse to play…
Stocks to Soar or Meet a Grisly End?
Last week our old pal Dan Denning warned you that a catastrophic market crash is inevitable. Well, he’s not the only one with a crash alert ringing loud.
Our new colleague Vern Gowdie, the chairman of Gowdie Family Wealth, warns that:
‘There’s going to be a stock market crash, here in Australia. A big one. The value of your shares may well have halved by this time next year.
‘The storm has been brewing since 2007. It will take around two more years to blow itself out. By the time it’s over, Australian stocks will most likely have fallen by 90%.‘
Many people have criticised us for giving you two opposite points of view – a bull market surge versus a bear market crash.
But giving you two views is a good thing. We would be doing you a disservice if we didn’t present these two different views. Not because it’s our purpose to offer a balanced point of view – we don’t do balanced points of view.
Instead, it’s important to introduce you to strong, well-researched ideas that have merit and which could help with your investing decisions. From that point on it’s up to you to decide which argument makes more sense.
Is it your editor’s view that investors will keep buying stocks as interest rates remain at record lows? Or is it that decades of government borrowing, spending and money printing must surely come to a financially grisly end?
Armed with both possibilities you can structure your investment portfolio in a way that suits your outlook and risk profile. That’s how we structure our personal investments. We’re backing the Aussie market to hit 7,000 points in 2015. But we haven’t put all of our money in stocks.
We own other investments such as cash, corporate securities (fixed interest), gold and silver. Depending on where we see the market heading we adjust how we invest our cash flow.
And that’s the thing. That’s what you have to do if you want to be an active investor…
Active Investing Isn’t for Everyone
Quite frankly – and sorry to be blunt here – if you can’t be bothered or don’t have the capacity to digest various well-thought ideas and analyses then you’ve got no business being an active investor.
If reading two different points of view confuses you and leaves you wondering what to do, then our guess is your mind isn’t really into being an active investor.
And that’s fine. It’s not for everyone. In fact it’s probably best that you admit it and move on. Instead of managing your own money, you’re probably better suited to letting an investment manager look after your money and paying them a whopping fee for doing so.
The only thing is, you should find out how aware they are of the problems facing the financial world. Because if they’re like the 99% of the financial pros we come across, they’ve got no idea.
They’ll probably tell you to put all your money in stocks because, well, if anything goes wrong the government will just put everything right again.
This is the value of Money Morning giving you alternate views. It’s not to confuse you. It’s not to provide a balanced view. It’s to provide you with an educated and thorough analysis of the outlook for the market.
Naturally, both your editor and Vern can’t be right with our two-year forecasts. Or can we? Although we’re banking on the ASX hitting 7,000 points in 2015, after that anything’s possible.
Cheers,
Kris+
Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years
